By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Warnings by the Bahamas-based dealer for Caterpillar construction equipment that it faces “financial ruin” if forced to immediately pay a $1.276m disputed VAT liability yesterday failed to impress the Supreme Court.

Acting justice Raynard Rigby KC refused to “stay” the Tax Appeal Commission’s December 9, 2025, verdict that Machinery & Energy Ltd, located on College Avenue in the Oakes Field area, must pay these outstanding taxes to the Department of Inland Revenue despite its ongoing bid to overturn this decision on appeal.

He found that the authorised Caterpillar dealer, which supplies vehicles and heavy-duty equipment and machinery to the construction industry, had failed to supply sufficient evidence to justify the Supreme Court temporarily barring payment of the disputed VAT. In particular, acting justice Rigby found the company had provided no financial records to justify its “financial ruin” and hardship claims if it was forced to pay-up now.

He instead noted that assertions by the VAT comptroller and Department of Inland Revenue, suggesting Machinery & Energy Ltd generated $7.384m in profit for 2025 and could thus easily pay the contested sum, had gone unchallenged by the company. Acting justice Rigby said this figure, derived from its VAT returns and other tax filings, “looks appealing” and suggests the Caterpillar dealer has the required “financial ‘muscle’” to make payment without causing it undue distress.

Machinery & Energy Ltd, in its Supreme Court submissions, argued that barring payment of the disputed VAT until its challenge to the Tax Appeal Commission verdict is determined was justified on multiple grounds including that it has “reasonable prospects of success”.

It also asserted that there was “no risk of prejudice” to the VAT comptroller and government revenues because it had secured the “potential liability” by obtaining a December 30, 2025, guarantee from CIBC Caribbean (Bahamas) to cover and underwrite the tax payment if it lost.

“ Immediate enforcement of the significant VAT assessment and penalties prior to the adjudication of the applicant's appeal would result in serious financial harm to the applicant and its operations, as the monies expended to satisfy the assessment are unlikely to be immediately recoverable should the applicant succeed on appeal and, in any event, the financial costs of meeting the assessment, which will continue until the recovery of the funds expended to meet the assessment,” Machinery & Energy said.

Antonia Benjamin, the Caterpillar dealership’s financial controller, in a January 20, 2026, affidavit doubled down on these fears by alleging the company “will suffer serious and irreparable financial prejudice", and that the "assessment sum of $1.276m, together with the penalty of $30,000 and interest, is substantial and would materially impair the applicant's cash flow, business operations and ability to continue trading in the ordinary course".

She also cited delays in the “Government’s payment process” involving VAT refunds as a further concern for Machinery & Energy. She also disclosed the January 14, 2026, letter from CIBC confirming that the $1.276m guarantee to underwrite the tax payment - should the company lose the VAT appeal - would remain in place for one year until December 31, 2026.

This, though, was countered by James Rhodes, a tax dispute resolution attorney and consultant to the Department of Inland Revenue, who “attacks the grounds of appeal”, raised issues with the guarantee and asserted that the Caterpillar dealer never contacted the tax authority to discuss a payment plan that “would take into account the applicant's cash flow, business operations and ability to continue trading in the ordinary course".

Mr Rhodes also alleged: “On the basis that the VAT collected on the applicant's sales represents 10 percent of the applicant's gross revenues from sales, and the VAT paid on the applicant's expenses represents 10 percent of the applicant's expenses, the VAT payable would be an approximation of the applicant's profit for the period of time from January 1, 2025, to December 31, 2025. That profit would be $7.384m

“Without any information being provided by the applicant to explain its cash flow, business operations, or cash needs for trading in the ordinary course of its business, the assessment sum represents approximately 18 percent of its profits from the 2025 calendar year.”

Based on acting justice Rigby’s verdict, the VAT dispute appears to be centred on Machinery & Energy Ltd’s assertion that the tax is not payable by itself because “the goods were assessed to its clients”. Its appeal claims the Tax Appeal Commission was mistaken in “finding that assessing VAT on the accommodation invoices did not amount to impermissible double taxation within the meaning of the VAT Act 2024" and that it had to prove appropriate tax was paid at the border.

“The Applicant also submitted that without a stay it would have to settle all future filings of the Department of Inland Revenue, and that the respondent would suffer no prejudice by a stay based on the terms of the letter of guarantee issued by CIBC,” acting justice Rigby said of Machinery & Energy’s arguments.

“The respondent attacked the stay application by focusing on the merits of the decision of the Commission, and argues that section 56 and regulation 34 of the VAT Act alleviate any double taxation. It also suggested that the applicant's ‘argument has no reasonable prospects of success’ because whether tax is paid on the import of the taxable supplies is not relevant for the appeal.

“The respondent also challenged the premise that the applicant will suffer prejudice if a stay is not granted. It drew attention to the fact that the letter of guarantee will expire on December 31, 2026.” Acting justice Rigby also noted this point in the VAT comptroller’s favour, suggesting that the fact the CIBC guarantee expires after a year suggests the Caterpillar dealer saw an indefinite undertaking was “was not feasible or commercially reasonable.

“It does appear to me that a guarantee of limited duration provides no material comfort to the respondent [VAT comptroller], who has the obligation to recoup the tax liability,” he added. “I also note that the applicant, while suggesting financial ruin if the tax liability is paid, elected not to disclose any financial statements or financial records to support its contention.

“The respondent challenged the applicant's bald statement of financial ruin and advanced the view that the 2025 profits for the applicant were in the region of $7.384m, making it possible for the tax liability to be paid and showing some financial 'muscle' in the applicant's resources. This proposition advanced by the respondent went unanswered by the applicant.

“In my mind, the respondent's suggestion of the probability of the applicant achieving a profit in the region of $7.384m looks appealing on the basis of the tax returns filed with the Department [of Inland Revenue] by the applicant. While I am unable to irrefutably conclude that the applicant's profitability was as suggested by the respondent, I am however unable to agree with the applicant's argument that without a stay it will suffer serious and irreparable financial prejudice.”

Acting justice Rigby continued: “There is no suggestion in the applicant's evidence that its cash position will be severely depleted if the tax liability is paid. Its ability to obtain the letter of guarantee suggests that it has funding and can meet the tax liability. The evidence therefore seems to be contradictory that if the tax liability is paid pending the appeal, the applicant will be ruined.

“The applicant's decision to place no financial information before the court to support its position of financial hardship or ruin, and to show that it lacks the resources to pay the tax liability, gave me no basis to assess and determine the substance of their submissions.” Acting justice Rigby said Machinery & Energy’s ability to enter into a payment plan with the Department of Inland Revenue “is contrary to any possibility of financial ruin” and ease any fears it would cease business if forced to pay now.

The judge also found there was no evidence to support the Caterpillar dealer’s concerns about late government payments. Machinery & Energy Ltd was represented by John Wilson KC of McKinney, Bancroft & Hughes, while Kirkland Mackey and Renee Charles acted for the tax authorities.